On June 27, the D.C. Circuit Court granted mandamus and addressed the application of the attorney-client privilege to internal investigations. In re: Kellogg Brown & Root, Inc., et al., No. 14-5055. The petitioners in KBR sought mandamus relief after the district court ordered that petitioners produce records of their internal investigation into potential fraud. The Circuit Court strongly derided the district court for its holding, noting that the decision would eradicate the privilege for a significant swath of American industry. It concluded that the lower court’s decision was irreconcilable with the U.S. Supreme Court decision in Upjohn Co. v. United States, 449 U.S. 383 (1981), and held that the internal investigation records were protected by the attorney-client privilege.

The district court attempted to distinguish the Upjohn holding from the facts in KBR. However, because the investigation in KBR was conducted at the direction of in-house counsel in petitioners’ law department, and the investigation was treated as confidential by petitioners’ employees none of the distinctions held water for denying the privilege claim.

In the most damaging part of its decision, the district court held that the investigation was not protected by the attorney-client privilege because the petitioners conducted the internal investigation in compliance with Department of Defense regulations. The district court reasoned that the privilege did not apply because petitioner’s “primary purpose” behind the investigation was to comply with the regulations, rather than obtaining legal advice. The circuit court vehemently disagreed. If a business conducts an internal investigation in order to obtain legal advice, then that investigation is covered by the privilege, even if it was conducted pursuant to a compliance program required by statute or pursuant to company policy. So long as obtaining or providing legal advice is one of the primary purposes of the investigation, then the privilege applies – it need not be the sole purpose.

The circuit court’s decision will help protect the attorney-client privilege for internal investigations conducted by businesses and their counsel, especially those businesses that are required by law to maintain compliance programs.